Friday, August 26, 2011

OfficialStatementby the Bureau of Economic Analysis is lower in this post.

USA GDP Q2 2011 Second Estimate The Bureau of Economic Analysis released the Second Estimate of Q2 2011 GDP which was +1.0% QoQ, for a total GDP of $14.997 trillion (annualized). This is an increase from the Q1 2011 GDP of +0.4% (revised). The Q2 2011 GDP (second estimate) of +1.3% is the lowest since prior Q1 2011 (+0.4% revised) and Q3 2009 (+1.7% revised). However, the GDP has increased for 8 consecutive quarters, since Q3 2009, although growth rates have ranged from a near-abysmal +0.4% in Q1 2011 to an encouraging +3.9% in Q1 2010.

Where is the USA Economy Going? The BigQuestion: where is the USA economy headed? Three scenarios are usually discussed: 1) a double dip recession whereby the GDP will turn negative yet again with a higher unemployment rate, 2) the economy will continue "bottom bouncing" with very slow growth and a continuing high unemployment rate or 3) the bottom is in and GDP growth will accelerate and the unemployment rate will begin to decrease. Scenario 2) with slow economic growth and a continuing high unemployment rate appears to be the consensus for 2011 with an annual GDP growth projected of approximately +1.5% or less. The risk of a double-dip recession has increased significantly in 2011, initially because of the spike in oil prices dragging on USA and Global economic growth plus the Japanese earthquake, tsunami, and nuclear crisis disrupting the global economy. Both events occurred in March 2011 and the effects have subsided subsequently.

USA Real GDP % by Quarter (Chart) The chart below is the annualized percentage change of the Real GDP (seasonally adjusted at annual rate) from the preceding quarter (QoQ), a common GDP measure. An initial negative drop occurred in Q1 2008, but was followed by a positive bounce in Q2 2008. A negative drop into the Great Recession began Q3 2008, followed by a steep decline in Q4 2008. The Great Recession continued for 4 quarters until Q2 2009. Positive GDP growth resumed in Q3 2009, the rebound peaking in Q1 2010. The Q1 2010 GDP of +3.9% is now the recent recovery peak. The Federal Reserve via the Federal Open Market Committee resorted to QE1 and QE2, direct quantitative easing, plus indirect quantitative easing, in an attempt to boost the economy, increase the GDP, and bring down the unemployment rate. QE2 was completed June 30, 2011 although reinvestment of U.S. Treasuries and mortgage-back securities into longer-term securities will continue indefinitely (indirect quantitative easing). The chart covers the USA Quarterly GDP as reported by the Bureau of Economic Analysis from Q2 2005 through the latest quarter reported.

USA Real GDP $ by Quarter (Chart) The chart below is the Real GDP (seasonally adjusted at annual rate) in total current dollars (annualized). The USA GDP pre-recession peak was Q2 2008 and the Great Recession low was Q2 2009. USA GDP has now increased 8 consecutive quarters. The Q2 2011 GDP (annualized) exceeds both Q2 2008 pre-recession peak and the prior Q1 2011 peak to reach an all-time high. The chart covers the USA Quarterly GDP (annualized) as reported by the Bureau of Economic Analysis from Q2 2005 through the latest quarter reported.

Commentary The Q2 2011 USA Quarterly GDP (second estimate) of +1.0% continues the recovery disappointment and is dismal. We estimated the USA Quarterly GDP QoQ for Q2 2011 as probably +1.5% or less, which is below the second estimate. The current Q3 2011, the QE 9-30-11, appears from various economic indicators to be as weak as Q2 2011. We now initially estimate the USA Quarterly GDP QoQ for Q3 2011 as +1.5% or less. There is an increasing risk of a recession, a negative GDP, but this does not appear to have occurred yet in Q3 2011.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.0 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.

The GDP estimates released today are based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 1.3 percent.

The increase in real GDP in the second quarter primarily reflected positive contributions from nonresidential fixed investment, exports, personal consumption expenditures (PCE), and federal government spending that were partly offset by negative contributions from state and local government spending and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the second quarter primarily reflected a deceleration in imports, an upturn in federal government spending, and an acceleration in nonresidential fixed investment that were partly offset by decelerations in PCE and in exports and a downturn in private inventory investment.

Final sales of computers added 0.11 percentage point to the second-quarter change in real GDP after adding 0.08 percentage point to the first-quarter change. Motor vehicle output subtracted 0.15 percentage point from the second-quarter change in real GDP after adding 1.08 percentage points to the first-quarter change.

Bureau of Economic Analysis Revised USA GDPs

On July 29, 2011, the BEA announced revisions of the USA quarterly and annual GDPs from Q1 2007 through Q1 2011. The original, final data and the revised data are shown on the chart below. The BEA provides an original 3 estimates (advance, second, third) and periodically revises the third, final estimate. These data and the revisions are the American economic story, subject to change.

Revisions: USA Real GDP % by Quarter (Chart) The chart below is the annualized percentage change of the Real GDP (seasonally adjusted at annual rate) from the preceding quarter (QoQ), from Q1 2008 through Q2 2011. The original Bureau of Economic Analysis GDP data is in blue. The revised Bureau of Economic Analysis GDP data is in red. An initial negative drop occurred in Q1 2008, but was followed by a positive bounce in Q2 2008. A negative drop into the Great Recession began Q3 2008 at the time of the USA Financial Crisis, followed by a steep decline, and bottom, in Q4 2008. The deepness of the Great Recession continued in Q1 2009. The Great Recession continued for 4 quarters until Q2 2009. Positive GDP growth resumed in Q3 2009, the rebound peaking in late 2009 and early 2010. The Q1 2010 GDP of +3.9% is now the recent recovery peak.

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